drunkoski;569482 said:

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what happens when said bonds mature? municipalities aren't borrowing just for new projects they are borrowing to run the city/county/state.

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Borrowing to run the city/county/state is a pretty small slice of muni bonds. And it's short term debt meaning the cost premium would not be felt as deeply.

The big fiscal threats are in things like pensions and health care costs for retirees, not this proposed tax change.

Although the debate regarding exactly how the deduction changes will be implemented and the impact on Munis is highly relevant, I'd also like to commit a rookie mistake and raise the issue of basic fairness and logic to this proposal.

Let's take a hypothetical taxpayer and call him drunkoski. Now let's assume that drunkoski has a taxable income of $500k this year. That would qualify the upper end of his income for the top tax bracket of 35% (more if the Bush tax cuts are repealed but that's a different debate). Now let's say that he gives away $100k to the American Cancer Society and receives no benefit from this other than a thank you note. He's giving his money away and receiving nothing in return. Under the current system, the federal government is not taxing him at all on money that he's giving away. Makes sense to me. Now the proposed change is saying that he can still give his money away but the federal government wants to charge him $7,000 anyway. Where's the logic there? This rule will certainly decrease the amount of charitable giving and that's a shame. Why is that the government can tax you on money that you give away? In effect, it's taxing charitable organizations.

Now I voted for Obama but every day I wonder why.

about taxes on folks who own municipal bonds, not. It comes down to some pretty basic stuff, there's a huge imbalance between expenses and revenue, both currently and longer term for the federal government and most states. Who was responsible for it, etc. makes for nice political arguments, but does zero to solve the problem.

Going forward the two items mentioned above have to come into balance. So you've got a choice you can increase revenue (and this can be done in a variety of ways), you can reduce expenses via cuts in goods and services (something that no politician regardless of political affiliation appears capable of doing--pandering is easier and apparently more successful with the majority of entitled voters) or you can do a combination of both. Oh, and it isn't going to come into focus through government efficiencies alone (a popular argument). The financial magnitude of the problem is too large. No doubt this is an issue and needs to be dealt with, but lumping it in as a solution our economic ills is, uh, pandering.

Oh, and for what's it worth, which isn't much -- let's see I'm a fiscal conservative, have the requisite B.S. in business and M.B.A. (which to some folks on this thread seems to matter), voted for Obama (last election) and George McGovern (first time voting) and everyone else in between.

cal97;569492 said:

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Although the debate regarding exactly how the deduction changes will be implemented and the impact on Munis is highly relevant, I'd also like to commit a rookie mistake and raise the issue of basic fairness and logic to this proposal.

Let's take a hypothetical taxpayer and call him drunkoski. Now let's assume that drunkoski has a taxable income of $500k this year. That would qualify the upper end of his income for the top tax bracket of 35% (more if the Bush tax cuts are repealed but that's a different debate). Now let's say that he gives away $100k to the American Cancer Society and receives no benefit from this other than a thank you note. He's giving his money away and receiving nothing in return. Under the current system, the federal government is not taxing him at all on money that he's giving away. Makes sense to me. Now the proposed change is saying that he can still give his money away but the federal government wants to charge him $7,000 anyway. Where's the logic there? This rule will certainly decrease the amount of charitable giving and that's a shame. Why is that the government can tax you on money that you give away? In effect, it's taxing charitable organizations.

Now I voted for Obama but every day I wonder why.

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Another way to look at it is that when the taxpayer in your example gives away $100k, he's really giving $65k, and the federal government is giving $35k. And in fact under the current system, the taxpayer's wealth is reduced by only $65k as a result of the gift, as he'll get $35k back by way of a reduction in his taxes. Under the new proposal, the taxpayer would be giving $72k of the gift, and the federal government would be giving $28k.

I can see arguments pro and con for this approach, but what I'd like to see instead is a complete overhaul of the tax system, where everything is put on the table and we try to start from scratch. I would feel better about big changes in that context. Doubt it will happen however.

The tax code is full of things that make little sense, like the tax breaks the NY Times detailed for video game makers last Sunday (http://www.nytimes.com/2011/09/11/technology/rich-tax-breaks-bolster-video-game-makers.html?_r=1&scp=2&sq=electronic%20arts&st=cse). The tax breaks originally were intended to encourage much needed research...now they are used to allow video game makers to reduce or in some cases completely avoid paying income tax. That makes sense to me!

The tax system is completely screwed up, and it won't be fixed if Congress tries to do it in a piecemeal fashion.

LafayetteBear;569491 said:

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Dajo: You read my mind.

Pingpong: Perry is not far enough right for your tastes? If so, I'm sure there are others who feel the same way, but I have to wonder how in the heck you could ever expect a candidate as conservative as Perry, much less one who is MORE conservative, to win a general election.

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No, he's not libertarian enough. If you look at Republicans historically, the focus has been on smaller government. Nowadays it seems like it's the opposite. Regardless of how left or right modern Republicans are, there's no denying that the party has shifted from its libertarian roots.

dlc54;569528 said:

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let's see I'm a fiscal conservative,

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Not sure what that means anymore. In my lifetime the fiscal conservatives have blown up the deficits (i.e. Ronald Reagan who tripled the national debt and GW Bush who turned a surplus into a $1.3 trillion deficit).

Whatever Clinton is called fiscally, that's me (B.A. Economics, MBA Finance, voted Clinton, Clinton, Gore, Kerry, Obama (Clinton in the primary)).

drunkoski;569563 said:

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spending increased during clinton's presidency. he just had the benefit of the greatest job bubble in american history making tax revenues explode. i'd gladly take him over obama though.

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So you're saying his demand-side policies contributed good things to the economy? I couldn't agree with you more.

drunkoski;569567 said:

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huh? a gift is money that has already been taxed prior. if i don't give away $100K, i don't only keep $65k, i keep $100K.

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After taxes you keep $65k. That's the marginal improvement in your position by not making the gift.

drunkoski;569567 said:

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huh? a gift is money that has already been taxed prior. if i don't give away $100K, i don't only keep $65k, i keep $100K.

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Okay, here's an example to illustrate my point. Assume two taxpayers, A & B, both have $100,000 in income and are subject to a flat 35% income tax rate. Taxpayer A makes no charitable contribution; Taxpayer B makes a gift of $1,000.

A has $100,000 in income, and pays $35,000 in taxes, leaving him with $65,000.

B has $100,000 in income, gives away $1,000 in gifts and pays $34,650 (35% of $99,000) in taxes, leaving her with $64,350 ($100,000 minus $1,000 minus $34,650).

So that gift B made cost her $650 ($65,000 minus $64,350), not $1,000.

drunkoski;569581 said:

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no rational person looks at it this way.

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Almost all of my clients who make charitable gifts (and I have some who make very large charitable gifts) absolutely think of it that way.

Edit: And if people who don't think of that way, then it seems to me that's an argument for Obama's proposal, as people won't give any less to charity. It's because people view things on an after-tax basis that this proposal is scaring the bejeesus out of charities.

drunkoski;569581 said:

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no rational person looks at it this way.

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No. Every rational person looks at it that way.

As for Clinton demand-side policies that contributed to the economy:
The earned-income-tax-credit
Spending on medicaid that allowed poor access to health care
I don't know if you want to call the tax increases on the wealthy "demand-side" but they helped to lower interest rates which helps the demand and supply side and allowed the spending on medicaid.

86Oski;569546 said:

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Another way to look at it is that when the taxpayer in your example gives away $100k, he's really giving $65k, and the federal government is giving $35k. And in fact under the current system, the taxpayer's wealth is reduced by only $65k as a result of the gift, as he'll get $35k back by way of a reduction in his taxes. Under the new proposal, the taxpayer would be giving $72k of the gift, and the federal government would be giving $28k.

I can see arguments pro and con for this approach, but what I'd like to see instead is a complete overhaul of the tax system, where everything is put on the table and we try to start from scratch. I would feel better about big changes in that context. Doubt it will happen however.

The tax code is full of things that make little sense, like the tax breaks the NY Times detailed for video game makers last Sunday (http://www.nytimes.com/2011/09/11/technology/rich-tax-breaks-bolster-video-game-makers.html?_r=1&scp=2&sq=electronic%20arts&st=cse). The tax breaks originally were intended to encourage much needed research...now they are used to allow video game makers to reduce or in some cases completely avoid paying income tax. That makes sense to me!

The tax system is completely screwed up, and it won't be fixed if Congress tries to do it in a piecemeal fashion.

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I hear what you're saying in your first paragraph if you think about it from the perspective of the charity receiving $100k. From that point of view, it's just a question of how much of that $100k gift is subsidized by the government in the form of an avoided income tax. From the perspective of drunkoski, it's different. Let's say that he only wants to give up $65k of his disposable income. Under the new proposal, he gives up $72k of his disposable income by making a $100k gift. This incentivizes him to give less and the charity suffers. In limiting the tax deductability of drunkoski's donation, the government is not hurting him because he can simply choose to give less but is hurting the charity that he wishes to support.

No argument about the lack of logic in the tax code. It absolutely should be scrapped and recreated from scratch. Of course, we all know that isn't going to happen because every loophole was bought and paid for by somebody who will fight to protect it.

cal97;569492 said:

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Let's take a hypothetical taxpayer and call him drunkoski. Now let's assume that drunkoski has a taxable income of $500k this year. That would qualify the upper end of his income for the top tax bracket of 35% (more if the Bush tax cuts are repealed but that's a different debate). Now let's say that he gives away $100k to the American Cancer Society and receives no benefit from this other than a thank you note. He's giving his money away and receiving nothing in return. Under the current system, the federal government is not taxing him at all on money that he's giving away. Makes sense to me. Now the proposed change is saying that he can still give his money away but the federal government wants to charge him $7,000 anyway. Where's the logic there? This rule will certainly decrease the amount of charitable giving and that's a shame. Why is that the government can tax you on money that you give away? In effect, it's taxing charitable organizations.

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How is this any different from other phaseouts? Under the US system, certain deductions become only partial deductions as income rises. I am not saying I agree with the proposal, I just don't see how it is any different from many other features of the US Tax Code.

drunkoski;569607 said:

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ditto. i think we aren't actually disagreeing. they think of it as the money they get back.

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DO arguing with himself. Let's see if he can get the thread to 10 pages all by himself.

cal97;569605 said:

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I hear what you're saying in your first paragraph if you think about it from the perspective of the charity receiving $100k. From that point of view, it's just a question of how much of that $100k gift is subsidized by the government in the form of an avoided income tax. From the perspective of drunkoski, it's different. Let's say that he only wants to give up $65k of his disposable income. Under the new proposal, he gives up $72k of his disposable income by making a $100k gift. This incentivizes him to give less and the charity suffers. In limiting the tax deductability of drunkoski's donation, the government is not hurting him because he can simply choose to give less but is hurting the charity that he wishes to support.

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I absolutely agree that this proposal would cause a reduction in charitable giving. Another way of saying what you just said that is consistent with my earlier post is that if we decrease the government subsidy to charities, charities will receive less, on the whole.

drunkoski;569612 said:

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you consider these things the reason we have a tax surplus during the clinton era? how did tax increases on the wealthy lower interest rates? what the hell are you talking about?

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They contributed to the economic growth that generated the revenue to pay down the debt.

The tax increases on the wealthy did lower interest rates:
http://ed.gov/PressReleases/08-2000/wh-0805.html

Lowered Interest Rates and Increased Productivity

- 1993 Plan - Fiscal Responsibility Produced an Immediate Drop in Interest Rates: Even though the recession had technically ended when President Clinton and Vice President Gore took office, America remained mired in high unemployment and slow economic growth. The passage of the deficit reducing legislation almost immediately led to a drop in interest rates, which spurred investment and led to an increase in the rate of job creation, wage growth and productivity.

- According to Federal Reserve Chairman Alan Greenspan, the '93 plan was "an unquestioned factor in contributing to the improvement in economic activity that occurred thereafter." [House Banking Committee Testimony, 2/20/96]

- "Clinton's biggest gift to consumers was the sharp drop in interest rates in 1993. Following the President's early drive to lower the deficit, the Federal Reserve cut short term rates while bond traders drove down long-term rates, sending 30-year fixed mortgages from 8.31 percent in November 1992 to 6.83 percent in October 1993. That's the lowest overall mortgage rate since 1971." [Money Magazine, August 1996]

- "Clinton's 1993 budget cuts, which reduced projected red ink by more than $400 billion over five years, sparked a major drop in interest rates that helped boost investment in all the equipment and systems that brought forth the New Age economy of technological innovation and rising productivity." [Business Week, 5/19/97]

- Today - Families have Enjoyed $2,000 Effective Tax Cut: Wall Street analysts credit deficit reduction with lowering interest rates by 2 full percentage points. [Goldman Sachs, GSWIRE Undistorted by the Budget Surplus, April 14, 2000]. This means that a family taking out a home mortgage of $100,000 expects to save roughly $2,000 per year in mortgage payments. Thanks in part to low mortgage rates, the homeownership rate increased to 67 percent in 1999 --the highest rate on record. Lower interest rates also cut both car payments and student loan payments by $200 annually for families taking out typical loans.

Mr. Frumble;569614 said:

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How is this any different from other phaseouts? Under the US system, certain deductions become only partial deductions as income rises. I am not saying I agree with the proposal, I just don't see how it is any different from many other features of the US Tax Code.

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I don't think it is different than other phaseouts other than the fact that giving money to charitable causes is a completely voluntary act. Besides that, I don't think it is that different from other phaseouts but it is effectively trying to raise revenue by hurting private charities and I think that's shameful.

cal97;569623 said:

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I don't think it is different than other phaseouts other than the fact that giving money to charitable causes is a completely voluntary act. Besides that, I don't think it is that different from other phaseouts but it is effectively trying to raise revenue by hurting private charities and I think that's shameful.

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Yes, giving money to charity is a voluntary act, but so is putting money in your kid's college fund, or in your own retirement account. But in the US, some people get full deductions for such voluntary acts, while others get a partial deduction, and, in the case of IRAs, others get no deduction.

I agree with you that the proposal will hurt charities. Is anyone saying otherwise? (I haven't read the entire thread, so I aplogize in advance if someone has actually taken that position).

drunkoski;569629 said:

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this is some ridiculous rewriting of history. greenspan lowered interest rates. it had nothing to do with bill clinton. bush had historically low interest rates too. would you suggest he raised taxes on the rich?

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Are you being serious? Does the Fed act in a vacuum? Does the President have "nothing to do" with the economic conditions that lead to Fed actions?

dajo9;569603 said:

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No. Every rational person looks at it that way.

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+1 - hard to understand what the definition of rational would be if you didn't take into account the tax impact of a charitable donation.

My irrational side also tells me that every dollar I donate is [insert my marginal tax rate times 1 dollar] less money that the federal government can throw away on something I don't believe in. Essentially, my donations shift money from the military [aka republican welfare] toward causes I believe in. I would be a much happier taxpayer if I had some ability to direct which discretionary government programs would receive my tax dollars. Knowing that this will never happen, at least with charitable contributions taxpayers can obtain a similar goal.

Unit2Sucks;569659 said:

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My irrational side also tells me that every dollar I donate is [insert my marginal tax rate times 1 dollar] less money that the federal government can throw away on something I don't believe in. Essentially, my donations shift money from the military [aka republican welfare] toward causes I believe in. I would be a much happier taxpayer if I had some ability to direct which discretionary government programs would receive my tax dollars. Knowing that this will never happen, at least with charitable contributions taxpayers can obtain a similar goal.

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Unless of course government spending takes into account the extent of charitable support for various causes, in which case your support for a cause may allow gov't to spend less money on that cause and more money on the military. Kind of like NGO spending allowing developing country governments to neglect basic human needs and shift spending to the military.

Mr. Frumble;569635 said:

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Yes, giving money to charity is a voluntary act, but so is putting money in your kid's college fund, or in your own retirement account. But in the US, some people get full deductions for such voluntary acts, while others get a partial deduction, and, in the case of IRAs, others get no deduction.

I agree with you that the proposal will hurt charities. Is anyone saying otherwise? (I haven't read the entire thread, so I aplogize in advance if someone has actually taken that position).

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No, I don't think anyone's saying otherwise. I'm just saying that it's weird. The administration is trying to spin this as limiting tax benefits to the rich when the ones who are going to be hurt the most financially are charities. That's what I was commenting on.

86Oski;569620 said:

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I absolutely agree that this proposal would cause a reduction in charitable giving. Another way of saying what you just said that is consistent with my earlier post is that if we decrease the government subsidy to charities, charities will receive less, on the whole.

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True, but that's way more concise and to the point than I'm trained to be. If I actually said things clearly and efficiently, then I wouldn't get to hear (or in this case read) the sound of my own voice.